The vacancy rate in the Cleveland industrial market reached an impressive mark during the second quarter of 2021: With a vacancy rate of 4.9 percent, the Cleveland industrial market’s vacancy rate has now stayed under 5 percent for three consecutive quarters.
That’s the good news from the second quarter 2021 Cleveland industrial market report from Newmark. According to the report, the Cleveland industrial market remains strong, with no sign of a slowdown on the horizon.
According to Newmark’s report, the industrial vacancy rate in the Cleveland market actually increased by 30 basis points during the second quarter. That increase, though, wasn’t enough to break the market’s streak of under-5-percent vacancy rates. This is notable: The industrial vacancy rate in the Cleveland market has been below 5 percent for four total quarters in the last 20 years. And three of those quarters have been the last three.
But why did the vacancy rate rise even a bit during the second quarter? Newmark said that industrial property sales were sold, but lease demand during the quarter was lukewarm. Lease occupations didn’t outweigh the loss of space during the quarter, with 814,115 square feet of negative absorption.
Newmark pointed to an increase in lower-class vacant owner/user sales that came to market, as well as older buildings that gave up space. The negative absorption, though, is likely a short-term setback, according to Newmark. That’s because interest in industrial assets remains high, especially for the class-A warehouse and distribution sector of the market. That sector of the industrial market in Cleveland has a vacancy rate of just 3.8 percent.
Another positive sign in the Cleveland industrial market? As the second quarter reached its end, more than 4.03 million square feet of industrial product was under construction. That’s the most square feet under construction in the market’s history. Of the industrial space under construction, 3.15 million square feet is slated to become Class-A speculative warehouses.
Most of the product under construction is scheduled to deliver by the third and fourth quarters of 2021.